How can you tell if your marketing efforts are working?
Key Performance Indicators, or KPIs for short, help you accurately track how successful your marketing efforts are and can give insight on ways to improve your profits.
All of your marketing should be measurable. Without this information, you won’t be able to make well-informed marketing decisions and adjustments. You won’t know whether your marketing efforts are gaining you money, or losing it. Nobody wants to invest in a marketing activity that’s losing their company money!
Here are 10 marketing KPIs you should be tracking to help reach your marketing goals.
It goes without saying that the number one way to track your marketing performance is via your sales revenue. How much revenue are your marketing campaigns and efforts generating?
The end goal of almost any marketing effort is to make more money. Understanding where your revenue comes from and how much of it can be attributed to marketing is essential to track how well your marketing strategy is working.
You should be able to track each individual effort rather than all marketing as a whole.
How much is it costing you to convert each potential lead into a customer?
Your customer acquisition cost (CAC) is determined by the total marketing budget spent divided by the number of new customers received.
You may get a lot of revenue from one sale, but if you’re spending more on acquiring a customer than that customer is spending on your products or services, you won’t make a profit.
The cost per customer acquisition helps businesses determine how much money to spend on attracting a customer. You may also use this figure to budget how many customers you want to acquire each year.
How much revenue can your business expect to gain from a single customer over their customer lifetime? Are your customers “one-time” customers, or are they returning for more?
The customer lifetime value (CLV) is the amount of money you can expect a customer to spend in your business over their lifetime. This is another great metric to figure out how much money you should spend on attracting a customer.
The customer lifetime value can be determined using the formula: revenue * gross margin * number of lifetime purchases.
For example, say you sell refrigerators for $1000, your gross margin is 40% and in an average lifetime, this customer will buy 6 refrigerators. Your customer lifetime value is 1000 * 0.4 * 6 = 2,400. So the average lifetime value of this customer is $2,400.
Acquiring a new customer can cost up to five times more than it does to keep an existing one.
You want to make sure your marketing efforts aren’t just focused on gaining new customers, but also on growing bonds and nurturing relationships with your existing customers.
Think about it, they’re already spending money on your product or service. The convincing work is already done, you just need to touch base now and then, informing them of new products and services, or anything else they might find value in.
A high customer retention value will contribute to a higher customer lifetime value, as your customers continue to make return purchases.
Return on Investment (ROI), in terms of marketing, is the percentage of profit you make from your marketing efforts. It is the return of profit that you get on your marketing investment.
ROI is calculated as (revenue – costs) / costs
Say you run a marketing campaign where you spend $5000 on marketing and receive $8000 in revenue. The return on investment for your campaign is (8000 – 5000) / 5000 = 0.6, or 60%. This means that you made an additional 60% profit on top of your original investment.
Keeping track of your ROI ensures you don’t overspend or underspend on your marketing campaigns.
Your website traffic is everybody who was or is interested enough in your brand to visit your site, these are your potential leads. Keeping track of who these people are and their behavior on your website helps you determine one key thing: what it is they want from you.
Website traffic is a broad term, it consists of many components. Some key website traffic components you should track in order to learn more about your visitors are:
You should track the amount of sessions visitors from each source spend on your website regularly. If getting more visitors on your website is the goal of one of your campaigns, taking a look at your traffic sources is a great marketing KPI to measure success. It’ll also show you where your visitors are coming from, and what keywords they’re searching to find you.
Here are the key sources that you should measure:
As you will know by now, your social media strategy plays a major role in your marketing performance. Social media is such a great way to capture your target audience’s attention and drive conversions because of how many people you can expose to your business with such little effort.
Social media engagement can be tracked through:
A marketing qualified lead (MQL) is somebody who has expressed interest in your business but isn’t quite ready to buy. The exact definition for an MQL will differ with each business, but typically it’s somebody who has responded to one, or more, of your marketing campaigns.
A sales-qualified lead (SQL) is somebody your sales team wants to contact who is ready for conversion. With proper nurturing, an MQL can become an SQL, and eventually a customer.
Tracking the amount of MQL’s who become SQL’s helps you to clearly understand the handoff between marketing and sales. By aligning sales and marketing, you can expect this ratio to grow closer.
A conversion rate could be anything from completing an online form, attending an event, or making a purchase. It’s the percentage of potential leads who complete a certain action.
It’s an effective marketing KPI to track because it lets you know which of your marketing efforts are best at attracting leads. Tracking your conversion rates helps you make a decision on which strategies are working well and which need to be altered or reconsidered.
No matter how big or small your marketing campaign is, you won’t be able to know how well it has succeeded unless you measure everything. Tracking your marketing KPIs is a great way to optimize your marketing and get the most out of your budget! With the right marketing indicators, you’ll be able to tell where to invest, where to hold back, and which marketing strategies need more work.
While these 10 marketing KPIs are a good place to start, there are plenty of other marketing indicators out there. Depending on your type of business and marketing strategy, you may benefit from tracking different KPIs.